PAWS Inc, Has Structured a Currency Swap Through Its Bank

PAWS Inc., has structured a currency swap through its bank. PAWS intends to use the funds to finance an expansion in its Irish operations. The terms are that PAWS will borrow $2 million at a 9% rate, with interest only paid in the first 2 years and all principal repaid after three years. The bank will provide punts (Irish currency) at an exchange rate of Ir£0.65/$ and an interest rate of 12%. Illustrate the flows between PAWS and the bank during the 3-year loan.

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